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TTB Eases Tax Requirements on Alc. Beverage producers

Internal Revenue Code Amendments Eliminating Bond Requirements and Adding
Annual Tax Return Periods for Eligible Alcohol Taxpayers
To: Alcohol Excise Taxpayers and Applicants for Permits and Brewers' Notices,
and Others Concerned.
1. Purpose.
In this Industry Circular, the Alcohol and Tobacco Tax and Trade Bureau (TTB) is
providing guidance regarding a change in tax return due dates and the removal of bond
requirements for certain eligible taxpayers who pay taxes below certain maximum
amounts on distilled spirits, wine, and beer. These changes result from the Protecting
Americans from Tax Hikes Act of 2015 (“the PATH Act”), Public Law 114-113, signed
into law on December 18, 2015, which amends certain sections of the Internal Revenue
Code of 1986 (IRC). See 26 U.S.C. 5061 and 5551. These amendments will take effect
on January 1, 2017.
TTB has developed regulations to implement these statutory changes, which will be
published soon.
2. Overview of Changes.
Annual Filing. The PATH Act amendments to the IRC authorize a new annual tax
return period. Beginning with the calendar quarter starting January 1, 2017, taxpayers
who reasonably expect to be liable for not more than $1,000 in taxes imposed with
respect to distilled spirits, wine, and beer for the calendar year and who were liable for
not more than $1,000 in such taxes in the preceding calendar year, may pay those
taxes annually, rather than semi-monthly or quarterly. (Certain wine proprietors already
had the option to choose to file annually under 27 CFR 24.273.)
Taxpayers with multiple locations must combine their tax liability for all locations with
respect to distilled spirits, wine, or beer to determine their eligibility to use the annual
return period. Taxpayers who choose to use the annual return period must identify the
return period they are using on their tax return form, and are not required to notify TTB
in advance. The annual tax return will generally be due January 14th of each year. See
26 U.S.C. 5061.
Taxpayers who become ineligible to use the annual return period (for example, their
excise taxes exceed $1,000 in a calendar year or they expect an increase in production
capacity that would increase their excise tax liability to over $1,000) may choose to use
either quarterly or semimonthly return periods, as authorized in the TTB regulations.
See 27 CFR 19.235, 24.271, 25.164, 26.112.
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Bond Exemption. The PATH Act amendments to the IRC also authorize a new bond
exemption for certain eligible taxpayers. Beginning with the calendar quarter starting
January 1, 2017, taxpayers who reasonably expect to be liable for not more than
$50,000 in taxes imposed on distilled spirits, wine, and beer for the calendar year (and
who were liable for not more than $50,000 in such taxes in the preceding calendar year)
and who pay excise taxes on a semi-monthly, quarterly, or annual basis, are exempt
from the requirements to file bonds covering operations or withdrawals of distilled spirits
or wines for nonindustrial use, or beer.
Because eligibility for the bond exemption depends in part on a taxpayer’s expected tax
liability, taxpayers who are eligible for the bond exemption and who want to operate
without a bond must notify TTB and obtain TTB approval. New applicants must notify
TTB that they are eligible for the bond exemption during the initial application process.
Existing taxpayers who wish to apply for the bond exemption must do so by amending
their permit or brewers’ notice.
TTB amended its application forms (including the online equivalents submitted using
TTB’s Permits Online system) to allow taxpayers to notify TTB that they are eligible for
the bond exemption and request TTB approval to operate without a bond. For more
efficient processing, TTB recommends that taxpayers who have previously applied
using Permits Online, as well as all new applicants, use Permits Online to submit
applications and amendments. Existing taxpayers who are not yet users of Permits
Online should file this amendment by paper application.
New Applicants
To streamline the application process, TTB recently added a new data field for paper
applications and applications submitted using Permits Online, in which applicants may
indicate that they reasonably expect to pay less than $50,000 in excise taxes in the
calendar year in which they begin operations. If applicants who make this indication are
eligible for the bond exemption, TTB will process their applications so that they can
operate without a bond upon approval. As a reminder, to remain eligible for the bond
exemption, taxpayers must pay taxes on a semi-monthly, quarterly, or annual basis.
Taxpayers who conduct operations or withdrawals of distilled spirits or wine for
industrial use, are still required to furnish bonds to cover such activities.
Existing Proprietors
Existing taxpayers who are eligible for the bond exemption and wish to terminate their
bonds must do so by amending their permits or brewers’ notices, using Permits Online
or the applicable paper forms. An existing taxpayer’s eligibility for the bond exemption
is based in part on the excise tax liability for the preceding calendar year. As a result,
TTB cannot begin processing an existing taxpayer’s bond termination request until it
receives the taxpayer’s final tax payments covering any remaining excise taxes incurred
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in 2016. If a taxpayer has not filed required reports, returns, or tax payments, TTB will
not be able to verify its eligibility for the bond exemption.
Taxpayers may file for the bond exemption in any year they become eligible. For
example, taxpayers who paid more than $50,000 in excise taxes in 2016, but pay less
than $50,000 in such taxes in 2017 and reasonably expect to pay less than $50,000 in
such taxes in 2018, may file for the bond exemption after January 1, 2018. However, a
taxpayer must submit all required reports, returns, and tax payments for TTB to verify
eligibility for the bond exemption.
Bond-related Terms in TTB Regulations
Taxpayers who are exempt from bond requirements under the PATH Act amendments
will be treated as if they have sufficient bond coverage for purposes of statutory or
regulatory provisions that reference bond coverage. For example, where the law and
regulations use such terms as “transfer in bond” or “bonded premises,” taxpayers who
are exempt from bond requirements will be treated as having a sufficient bond for
withdrawals and transfers (assuming all other requirements are met and applicable
applications are approved).
Questions. If you have any questions concerning this circular, please contact TTB’s
National Revenue Center by email at TTBInternetQuestions@ttb.gov or by telephone at
877-882-3277.
John J. Manfreda
Administrator
Alcohol and Tobacco Tax and Trade Bureau